D Pharmacy Model Answer Paper
Astryd Boschee
Last Updated: 6/1/2023
Issue: Pharmacy Benefit Managers (PBMs) are third party companies that function as intermediaries between insurance providers and pharmaceutical manufacturers. PBMs create formularies, negotiate rebates (discounts paid by a drug manufacturer to a PBM) with manufacturers, process claims, create pharmacy networks, review drug utilization, and occasionally manage mail-order specialty pharmacies.
In light of rising health care costs, the role of PBMs are being reviewed due to the cost of prescription drugs and the effects on consumers. The cost of insulin and EpiPens has been the focus of much of the news coverage, with patients being forced to ration medicine when they cannot afford copays.
Background: When insurance companies began offering prescription drugs as a health plan benefit in the 1960s, PBMs were created to help insurers contain drug spending. Originally, PBMs decided which drugs were offered in formularies and administered drug claims. In the 1970s, PBMs began to adjudicate prescription drug claims. In the 1990s, drug manufacturers began acquiring PBMs. Concerns about conflicts of interest caused federal orders for divestment from the Federal Trade Commission, sparking a trend of mergers and acquisitions within the PBM field.
PBMs work in conjunction with drug manufacturers, wholesalers, pharmacies, and health insurance providers but play no direct role in the physical distribution of prescription drugs, only handling negotiations and payments within the supply chain. When a new drug is available, the manufacturer negotiates with wholesalers who then sell and distribute drugs to pharmacies. PBMs negotiate agreements with drug manufacturers on behalf of insurers and are paid rebates by drug manufacturers. Pharmacy Services Administrative Organizations (PSAOs) negotiate reimbursements with PBMs on behalf of pharmacies. PBMs then pay pharmacies on behalf of health insurance providers for drugs dispensed to patients. PSAOs and PBMs are both third party companies with different functions and purposes. PSAOs represent and offer services to independent pharmacies and PBMs represent health insurers.
The NAIC currently has two model laws that protect the drug benefits of consumers. The Health Carrier Prescription Drug Benefit Management Model Act #22 provides standards for the establishment, maintenance and management of prescription drug formularies and other procedures used by health carriers that provide prescription drug benefits. The Health Benefit Plan Network Access and Adequacy Model Act #74 establishes standards for the creation and maintenance of networks by health carriers to ensure the adequacy, accessibility and quality of health care services offered under a managed care plan.
In order to address pharmaceutical cost drivers and the increasing concern, the NAIC created the Pharmacy Benefit Manager Regulatory Issues (B) Subgroup under the Health Insurance and Managed Care (B) Committee in November 2018. The Subgroup was tasked with creating a new NAIC Model Law to establish a licensing or registration process for pharmacy benefit managers.
A draft model, focusing on regulating PBMs through a standardized licensing or registration process, was adopted by the subgroup in 2020. However, ultimately the model was not adopted by the NAIC membership. Several individual states have passed legislation regarding the licensure of PBMs, spread pricing, rebate transparency, and fees.
The Board of Pharmacy Specialties (BPS) is an independent, nongovernmental certification body that develops and administers board certification examinations in recognized pharmacy practice specialties. BPS was created on January 5, 1976, by the American Pharmaceutical Association (now the American Pharmacists Association, APhA), and exists today as an autonomous division of APhA.
The BPS Board of Directors (the Board) is composed of 12 voting members, including nine pharmacists and three public members. The BPS Executive Director and one member of the APhA Board of Trustees are nonvoting ex officio Board members. For a current list of Board of Directors, click here.
BPS has established a specialty council for each recognized specialty. Specialty councils work with the Board to develop and administer psychometrically-sound and legally defensible certification examinations, consistent with the credentialing of health care professionals. A specialty council is comprised of at least 10 members who are board-certified in that specialty area. Each specialty council may include up to two additional members, each of whom may be either board-certified in that specialty area or a pharmacist not certified in that specialty area but with other qualifications and/or expertise pertinent to the specialty area. For a current list of specialty council members, click here.
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Disclaimer: The information provided above is accurate as of Q4 2023. State laws and rules are updated occasionally. For the most up-to-date information, please contact the appropriate State Board of Pharmacy.
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